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February 14, 2014

Changes Afoot in Washington Well Ahead of Midterm Elections

Senate Finance Committee has a new chairman; fiduciary advocate Tester's spot is up for grabs

Former Senate Finance Chairman Max Baucus. (Photo: AP)

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Changes are afoot in Congress well ahead of the midterm elections in November.

Before the Senate recessed until Feb. 24, Sen. Ron Wyden, D-Ore., was named the next chairman of the Senate Finance Committee, replacing Max Baucus, the former Democratic senator from Montana who was recently chosen by President Barack Obama to be the U.S. ambassador to China.

Wyden will take the reins at Senate Finance during a year in which progress on tax reform is supposed to move ahead. Before leaving his post, Baucus released in late 2013 a series of discussion drafts on reforming the nation’s tax code.

Kyle Pomerleau, economist for the Tax Foundation in Washington, says the release of Baucus’ proposals last fall “provided a marker” on where the House and the Senate stand on tax reform.

Indeed, Sen. Ben Cardin, D-Md., said at a January event that the budget and tax debate “will only be intensified as we move forward toward the midterm elections.” Sen. Rob Portman, R-Ohio, agreed, stating at the event that, “As we move forward, we will have to have tax reform and move every rock for revenue.”

Retirement planning groups, of course, will be working to ensure Wyden preserves the tax incentives for retirement savings plans.

Another important congressional appointment for advisors to watch will be who replaces Sen. Jon Tester, D-Mont., who just left his post as chairman of the Senate Subcommittee on Securities, Insurance and Investment to chair the Senate Indian Affairs Committee.

Tester was a vocal supporter of putting brokers under a fiduciary mandate. He told former SEC Chairwoman Elisse Walter during a Senate Banking Committee hearing last year that the SEC’s fiduciary rule should be a “priority because it is a benefit to investors” and that she should “push it.”

Neil Simon, vice president of government relations for the Investment Adviser Association, says he’d like to see Sen. Mark Warner, D-Va., take Tester’s spot, but Warner took Sen. Maria Cantwell's, D-Wash., spot on the Senate Finance Committee on Friday. Cantwell will succeed Mary Landrieu, D-La., as chair of the Small Business Committee. The next likely candidate to take Tester's position, Simon said, is Sen. Jeff Merkley, D-Ore.

On the House side, political strategist Greg Valliere said in a recent February commentary that the retirement of 20-term Rep. Henry Waxman, D-Calif., is “another sign that Democrats have virtually no chance of capturing the House this fall.” Another long-time “liberal lion” from California, Rep. George Miller, announced his retirement in early February. Miller was a senior democrat on the House Committee on Education and the Workforce.

Yet another retiring congressman from California is Rep. Gary Miller, R-Calif., vice chairman of the House Financial Services Committee, who announced Wednesday that he would not seek another term.

Indeed Valliere notes that while “much can change between now and November — the economy could re-accelerate by spring, boosting Obama’s dismal poll numbers—it’s virtually certain that Republicans will retain control of the House (perhaps even adding a few seats) and now are within striking distance of taking the Senate.”

He predicts that while Republicans should gain at least four or five Senate seats, “suddenly the magic number of six looks attainable.”

Of the Republican seats up for re-election, “only Georgia could fall — and that assumes Michelle Nunn (D) gets to run against a hard-right radical.” Otherwise, he continues, “here’s the new development: we all knew that there were seven shaky Democratic seats in states that Mitt Romney won — but now Democrats are looking vulnerable in additional states like New Hampshire and Colorado, which didn’t seem in play a few months ago.”